Quote :

"Which is good. Afterall, what is wrong with having foreigners help pay our tax burden? "

Nothing, which is why you should support the fairtax. In a country of over 300M we have about 140M that file taxes.

Under the fairtax, everyone becomes a taxpayer, including tourists.

7/22/2008 9:37:24 AM

Quote :

"Under the fairtax, everyone becomes a taxpayer, including tourists."

most countries, including the US i think, will refund a tourists sales tax upon leaving the country if it is above a certain amount ($50-100, i think). I would expect something similar would be in place with a fairtax.

7/22/2008 9:42:53 AM

agent, the fairtax isnt a sales tax so I dont think they would refund it.

Ive been to mexico 4 times and have never had my sales tax refunded.

7/22/2008 10:14:09 AM

Quote :

"Using this basis, they estimate that in the first year of the FairTax, prices would indeed increase 24.8%, but wages would rise by 27.4%, and disposable income would go up 1.7%."

You must remember that these numbers are averages; that "wages rise by 27.4%" goes to different people in different ways. High income earners stop paying income taxes at 35% and capital gains taxes and get in return a sales tax increase of 24.8%.

That said, the numbers still do not seem to add up. money is a stand-in for goods and services; if workers are suddenly given more inflation adjusted money this year than last year, then where is that extra supply of goods and services coming from? Yes, some will come from laying off everyone at the IRS and H&R Block, but I seriously doubt it would thrust 10.4% more buying power to the rest of us. And quite a bit will come from a one-time devaluation of all bank accounts, currency, and other denominated stores of value. However, I suspect a vast share of that buying power will come from the government being unable to raise the tax revenue it expected.

Quote :

"most countries, including the US i think, will refund a tourists sales tax upon leaving the country if it is above a certain amount ($50-100, i think)."

Mercantilist nonsense. As such, I fully believe you are right, as the law makers in Congress are nothing if not economically illiterate.

7/22/2008 10:17:49 AM

Quote :

"The point is that the consumer would buy these products at the retail level from Canadian businesses, which would then be shipped to the U.S. to the consumer. "

Some might do this, but not enough to make the FairTax unworkable. Not everyone is going to import their groceries, clothes, gas, psychiatric services etc.

Quote :

"Canadian dealers, who "use" them for 100 miles, and then the cars are imported tax free and sold tax free as used cars."

The FairTax bill doesn't define a used item as something that has been "used". The idea is that all new goods and services are taxed only once. So a used item is defined as something on which the FairTax has been paid. So even if you drive your new Canadian car around a moose and then ship it down to the U.S., the tax will still have to be paid once on the item.

Quote :

"That said, the numbers still do not seem to add up. I seriously doubt it would thrust 10.4% more buying power to the rest. I suspect a vast share of that buying power will come from the government ..."

As always, we come to the end of our discussion with a cynicism about each other's numbers.

7/22/2008 10:34:03 AM

What was wrong with my numbers?

Similarly, with the way you phrased it, it sounds as if every object in my home that has not been taxed will be taxed whenever I sell it... is that the case or does this only occur if I sell it to a Canadian?

7/22/2008 7:55:08 PM

bump by request

2/19/2010 9:30:02 AM

Is the requester going to post? What was the bump for?

2/21/2010 6:13:37 PM

Sorry, I asked it to be bumped, didn't realize it had been.

I still don't see why so many people are completely against the idea of a consumption based tax. The fact that the tax code is so absolutely complicated now with loophole after loophole, it would just be easier if the sales tax was a much higher rate. I'd love to actually bring home the salary that was negotiated when I was hired to do my job. I save as much as I can during the year as well.

I was just furious when I did my taxes this year. I followed the instructions on the form and was therefore claiming 2 on federal. So was the wife. When I did our taxes this year, came up with a $2,700 bill to the feds. That's just nonsense.

I know the first gut reaction is to claim it's a pointless idea because it taxes the poor. How does the rebate for the necessities not counter that?

I also think it would really helps to bring in taxes on the income that is never reported to the government.

Now i'm not as well versed as many of you, and I've only read the Fair Tax book once, so I'm prepared to be ripped apart. I just personally feel that the way our taxes are handled in this country are so far out of whack that at least SOMETHING has to be done.

2/22/2010 9:15:41 AM

What are the details regarding what goods will be taxed? Final goods only? New goods only? Will food and clothing be taxed? Services?

2/22/2010 10:22:47 AM

^All goods and services would be taxed (about 23% inclusive, 30% exclusive). Each month every taxpayer would recieve a "prebate" which would cover the tax on expenses up to the poverty level.

2/22/2010 10:38:12 AM

^everyone would get the prebate... but technically everyone now becomes a taxpayer. Just wanting to clarify that for those not familar with it, I know you are.

2/22/2010 11:55:27 AM

Quote :

"I still don't see why so many people are completely against the idea of a consumption based tax."

It's because it's too difficult to define the concept of "final goods". This problem causes the whole idea to collapse.

Quote :

"What are the details regarding what goods will be taxed? Final goods only? New goods only? Will food and clothing be taxed? Services?"

If you read their information they state that they will only tax final goods, this is in order to prevent multiple taxation.

2/22/2010 1:01:03 PM

And 23% is too high for a sales tax.

2/22/2010 1:12:01 PM

not if you arent paying other taxes. imo

Expanding the tax base is the key here. Also making it simple and one set of rules for everyone makes people less likely to cheat the system, as now where people get discriminated against.. so they feel they need to protect their income more. Why rich people take dividends instead of income. I dont blame them.

2/22/2010 1:20:42 PM

The main problem is self-incorporation, the difference in a person and a corporation is really meaningless. I am essentially a corporation that employs myself, I wouldn't file myself as that in the current tax system because I would get taxed twice on income, but fairtax wouldn't have that problem. It would reduce many of my expenses as they could be filed as B-2-B, for example the car I drive to work, food and lodging, computer, gas, etc. I wouldn't be able to work without these things, my work is an intermediate good used to produce what my company makes which could or could not be filed as an final good. Not only would you have most people able to legally dodge paying this tax, but you'd have companies lobbying to try and get their good able to be considered an intermediate good for self-incorporated people.

2/22/2010 1:23:36 PM

I see your point Kris. I havent read the book in awhile, but my thought it was just the final product/retail.

I suppose that would work. Your taxes would be lower, so your costs would be lower. So you could either leave your prices as is, and keep the extra profit. (which is fine by me) Or you might have to lower your prices bc of one of your competitors.

However, I do see your point on where do you draw the line.

2/22/2010 1:39:02 PM

The real problem is that the fairtax goes by where the line for final goods is drawn now, and assumes it won't change. The problem is that the line is drawn where it is now BECAUSE of the income tax system. A fairtax system would really cause the line to be drawn more accurately based on the definition of a final good, unfortunately significantly less items actually are final goods and it would cause fairtax to generate very little revenue.

2/22/2010 1:44:36 PM

^im not sure I agree with that. Some people hold onto their money like its boiling water. Im all for the idea of letting people keep what they earn and having our govt treat everyone equally with regard to our tax structure. I do think people will not spend the same they do now with more money. Hopefully many will invest it, taxfree, which will expand business and lower the dependence on SS. I have a bunch of people whose retirement is SS only.

Our tax system should be designed to fund our govt. Instead its misused for political gain. Seperating the two will do wonders for our country.

2/22/2010 1:50:59 PM

You're completely missing what I'm saying. The problem is what you define as final goods. They think that this whole group of things will be taxable final goods. The fact is that they are not really final goods, and would be changed to fall under that umbrella of non-taxed intermediate goods. Things like my gas to and from work, my house, my car, food, power, cable, phone, etc. I wouldn't be able to work without these, and essentially they are intermediate goods that I use to produce my labor, which I sell to my company as an intermediate good. This reduces the amount of taxable goods siginficantly, making it essentially just a big luxury tax. It's just a flawed system, and it's amazing that this fairy tale has made it nearly as far as it has.

[Edited on February 22, 2010 at 2:05 PM. Reason : ]

2/22/2010 2:03:56 PM

^ I know we've had this conversation before, but I'm still not convinced that "final good" is as difficult as you're making it out to be. In your example about, you argue (and people probably would) that your car, your food and your home are all intermediate goods if you're self employed but they aren't. When you sell your "product" you are not selling the car as well or your house in any way that is similar to a contractor buying a bucket of nails to build your house or a baker buying flour as an ingredient for bread. That we even begin to think of your car or your home as an intermediate good seems to me to be a result of our current tax system, not because they actually are in anyone's mind (except tax accountants of course)

For that matter though, I'm not sure why we need to avoid this "double taxation" anyway. Lower the tax rate and call it the cost of doing business, just like any other expense. Is there a reason why the double taxation thing is particularly important to avoid if we're going to "prebate" everyone?

[Edited on February 22, 2010 at 2:08 PM. Reason : dgh]

2/22/2010 2:07:05 PM

no, you would pay the taxes on your gas, cars, etc when you buy them. I think the criteria of what wouldnt be charged the tax would be if an individual couldnt buy it. I dont think you could tax every part of the process or parts at whatever rate and then at the final sale without really increasing the cost of goods.

2/22/2010 2:09:28 PM

Quote :

"In your example about, you argue (and people probably would) that your car, your food and your home are all intermediate goods if you're self employed but they aren't. When you sell your "product" you are not selling the car as well or your house in any way that is similar to a contractor buying a bucket of nails to build your house or a baker buying flour as an ingredient for bread."

You're ignoring "services". When I pay for a taxi ride, I don't buy the car, but it is still part of the transaction.

Quote :

"For that matter though, I'm not sure why we need to avoid this "double taxation" anyway."

These people tend not to like how their income is taxed multiple times. Plus it would make it substaintially harder on businesses, the gears of our economy.

Quote :

"Lower the tax rate and call it the cost of doing business, just like any other expense. Is there a reason why the double taxation thing is particularly important to avoid if we're going to "prebate" everyone?"

It's difficult for me to argue against something different than Fairtax, as it is much more clearly defined and has a lot more written about it. You should suggest it to Neal Bortz, maybe he'll be more responsive to you than he is to me. It's an interesting idea, but it shifts the burden onto the producers instead of the consumers, which goes against some of the mantra of a lot of fairtax. My expectation would be that it would encourage large monolithical companies and demolish small businesses, but that's just a quick guess.

Quote :

"no, you would pay the taxes on your gas, cars, etc when you buy them."

For a taxi driver, gas and car are not final goods, why would he be taxed? Or a contractor who must drive to a location to work, none of these are final goods, you would incur double taxation.

[Edited on February 22, 2010 at 2:25 PM. Reason : ]

2/22/2010 2:23:51 PM

A taxi driver also doesn't (usually) drive their own car.

2/22/2010 2:48:48 PM

Quote :

"For a taxi driver, gas and car are not final goods, why would he be taxed? Or a contractor who must drive to a location to work, none of these are final goods, you would incur double taxation. "

I dont follow your point. The cab driver wouldnt pay taxes on the car, he doesnt own it. He would pay tax on the gas he put in it. He does now.

Im not sure how anyone is getting double taxed? You get taxed when you buy something, once. Not when you buy something and earn something.

2/22/2010 2:51:06 PM

Quote :

"A taxi driver also doesn't (usually) drive their own car."

That's irrelevant, there's plenty of other occupations that do. And considering there will be tax on the good that my service ultimately provides, why double tax on the fuel I use to get to work?

Quote :

"Im not sure how anyone is getting double taxed? You get taxed when you buy something, once."

The person who made the good was taxed on it earlier in the process and had to include those in the price of his good, thus you don't realize it, but you've paid the intial tax and the tax he had to put into the price of the good as well. This is the concept of an embedded tax, it's not one I neccesarily agree with, but it is what Fairtax uses to explain why it only tries to tax final goods.

[Edited on February 22, 2010 at 3:15 PM. Reason : ]

2/22/2010 3:11:12 PM

I have a question about the prebate:

Will we be able to write these $10k checks because Medicare and SS will no longer exist, or is it the tax structure completely independent of cuts to wealth redistribution programs.

2/22/2010 3:47:45 PM

No kris, the person who made the car wouldnt have been taxed on the production. It is only the final sale. So the suppliers wouldnt have been taxed on the way up of production. (like it is now) Thus the cost to produce these goods will be lower to make. And the cost to employ someone will be lower.

However, when you buy a car whether for business or personal... you will pay the "sales tax". Which you do now, AND get to pay your income and employment taxes... awesome. So you can say you are getting 1. sales tax on car 2. sales tax on gas 3. income tax 4. SS tax 5. state income tax 6. Medicare tax. How about that 6 dip currently. I could say 8 dip if you count the employers contributions to SS/Medicare.

Boone, I dont think the idea behind the fairtax is to get rid of SS or medicare. Just collect those taxes out of the fairtax itself, where everyone pays. Surely you would have to restructure SS bc you can no longer track who pays in what. Thus expanding the tax base from 150M to 300M(not really, but close)

2/22/2010 4:50:56 PM

Quote :

"No kris, the person who made the car wouldnt have been taxed on the production."

So then you are double charging services and not goods? Let's say I pay for telephone service, I would pay the sales tax on this, then are you charging me again when the telephone company buys a fleet of vans or tools or any of the number other intermediate goods they need to provide my service? Do you understand the concept of a final good or service?

The point is that you have to discriminate between a final and intermediate good when the distinction is not very clear or even accurate right now. To put it simply, Fairtax is a fail because they don't know what they want to tax.

2/22/2010 5:45:47 PM

You seem to be the only person having a problem defining intermediate good. Everyone else seems to be in agreement that it is a good purchased with the intent on using it to manufacture, or be transferred with, some other good or service.

Are their edge cases? Of course, but they are not in and of themselves good reason to reject the idea out of hand.

2/22/2010 7:13:59 PM

Quote :

"Everyone else seems to be in agreement that it is a good purchased with the intent on using it to manufacture, or be transferred with, some other good or service."

And a car and gasoline used to travel to work would be part of that manufacture.

2/22/2010 7:50:09 PM

^no. Neither is the electricity used to run a factor. One would pay taxes on that too.

is there some kind of business card you flash at the BP that gets you out of paying tax for gas? If so, how can i get one?

2/22/2010 8:18:21 PM

Quote :

"Neither is the electricity used to run a factor."

Yes, it is. Under your definition a software company would have no intermediate goods used, which is impossible. Their intermediate goods are computers, electricity, labor, etc.

Quote :

"is there some kind of business card you flash at the BP that gets you out of paying tax for gas?"

No, we tax intermediate goods.

2/22/2010 8:57:59 PM

From FairTax.org..

Quote :

"Since business purchases are not taxable, how does the FairTax keep individuals from pretending to have a business so they can buy things tax free? The FairTax has several features that make it difficult and very risky for persons to have a scam business in order to purchase items tax free. First, in order for any person to purchase items tax free for business purposes, the business has to be a registered seller and possess a registered seller certificate issued by the state sales tax authority. Registered sellers are expected to file monthly or quarterly sales tax returns with the state (depending on sales volume). The certificate enables the business to purchase tax free from wholesale vendors, but the vendor must retain a copy of the registration certificate to justify not having collected tax on the sale. When a business purchases items for business use from a retail vendor, they have to pay the tax on the purchase and take a credit against the tax due on their monthly sales tax return. They must keep invoices/receipts to document what they purchased and the amount of the purchase. They might also make note of the purpose of the purchase on the invoice. Also, as registered sellers, they are subject to the possibility of being audited by the state. During such an audit, they will have to produce the invoices for all the “business purchases” that they did not pay sales tax on and will have to be able to show that they were bona fide business expenses. If they cannot prove this, then they will have to pay the taxes that should have been paid when the items were purchased, plus interest and penalties. The probability of being audited will be much greater than it is under the current system with its over 140 million tax filers. Under the FairTax, there will be less than 20 million businesses that will be filing sales tax returns and thus subject to the possibility of being audited. Thus, the probability of tax cheats getting caught will be much greater than it is today, making tax evasion riskier than it is today. Additionally, while the FairTax has much stronger taxpayer rights than does the current tax system, the FairTax legislation provides for a number of fines and penalties for noncompliance. It also authorizes a mechanism for reporting tax cheats and obtaining a reward. An example would be 1-800-TAX-CHET. Another potential scam would be to have a “fake” family business in order to buy things for family members tax free. The FairTax has a specific provision to prevent this. Although it does not prohibit businesses from providing taxable property or services as gifts, prizes, rewards, or as remuneration for employment, the gift, reward, etc. is considered to be the conversion of property or services from business use to personal use and is therefore taxable. Likewise, there is a similar provision to prevent abuse of employee discounts. Under the FairTax, employer-provided employee discounts over 20 percent are taxable. The term “employee discount” means an employer’s offer of taxable property or services for sale to its employees or their families for less than the offer of such taxable property or services to the general public. If the employee discount amount exceeds 20 percent of the price to the general public, then the sale of such taxable property or services by the employer to the employee is considered the conversion of property or services to personal use and is subject to tax. The taxable amount is the amount by which the discount exceeds 20 percent of the price to the general public. "

2/22/2010 11:42:02 PM

I love debating things that will never happen.

2/22/2010 11:43:17 PM

Well Earthdogg, how are individuals different from contractors? They just sell labor. The difference between an individual and a corporation isn't all that clear, we are essentially all corporations, we just don't file like that due to double taxation in the current tax code. It's not that individuals are "scamming the system" they are just gaining the benefits they rightfully deserve that are given to corporations in your system. Please, explain why self-incorporation would be illegal in fairtax.

2/22/2010 11:56:41 PM

Nowhere does it say that self-incorporation is illegal under FairTax. Rather, tax evasion through it is. Self-incorporate all you want, but you better be prepared to defend it.

2/23/2010 12:04:38 AM

Quote :

"Please, explain why self-incorporation would be illegal in fairtax."

It's not illegal as long as you are a bona-fide business. You claim that it would be easy to scam the system by becoming a fake self-employed business for the purpose of getting items tax-free for personal use.

But it may not be that easy. At the store, you would be paying the Fairtax on everything you bought. You would then be allowed to claim a credit against the tax you collected from your customers. As you would have no customers, you would have to apply to get a refund of your taxes paid from the gov't. Too many of these refund requests from you or your immediate family will result in a audit and then fines and jail.

Is that worth the risk of trying to get your HDTV tax-free?

2/23/2010 12:15:12 AM

Quote :

"Self-incorporate all you want, but you better be prepared to defend it."

It's easy to defend, just show that you are selling your labor to whatever company employs you.

Quote :

"It's not illegal as long as you are a bona-fide business. You claim that it would be easy to scam the system by becoming a fake self-employed business for the purpose of getting items tax-free for personal use."

You wouldn't be fake, you would be a real single employee contractor service.

Quote :

"You would then be allowed to claim a credit against the tax you collected from your customers."

What if you sell business to business?

Quote :

"Is that worth the risk of trying to get your HDTV tax-free?"

It's not the TV you'd get, it's larger purchases, things like a house, car, gas, food, etc. Your fairtax would really just be a luxury tax for goods that couldn't lobby to be considered intermediate goods.

[Edited on February 23, 2010 at 12:20 AM. Reason : ]

2/23/2010 12:15:44 AM

at which point they will say "what does the HDTV have to do with you selling your labor to this company?" and you will say...

exactly. A smart-ass response of "i sell my labour to my company" won't fly. so don't act like it will

2/23/2010 12:21:27 AM

Like I said, you wouldn't get the HDTV. You would get gas and food though, as well as larger ticket items, like your car or house.

2/23/2010 12:23:18 AM

and you would explain the house how? if you don't work there, it won't fly. but yes, federal employees will be blind to this ruse and just let people evade taxes

2/23/2010 12:25:04 AM

I can't think of many contracting companies that don't have offices.

2/23/2010 12:26:52 AM

offices that have beds and the like? you'd have to show that the house was actually being used for the purpose of the business, just as you have to do right now. It would be no different. Same with the car and gas. You can't drive out to vegas for the week and claim it as a business expense. That's what the AUDITS are for. Yes, the tiny bits of time you use the car for business might be covered, but once they see that you are abusing the system to begin with, they'll just say "you owe for the car too, dumbass."

2/23/2010 12:29:29 AM

Quote :

"offices that have beds and the like?"

Sure, there are lots of legitimate businesses that operate out of home offices today.

Quote :

"you'd have to show that the house was actually being used for the purpose of the business, just as you have to do right now"

Lots of private self employed private contractors operate out of home offices today.

Quote :

"You can't drive out to vegas for the week and claim it as a business expense"

Sure you can't, vacations are a luxury, but I think people probably spend most of their gas driving to and from work everyday.

2/23/2010 12:39:36 AM

Quote :

"Sure you can't, vacations are a luxury, but I think people probably spend most of their gas driving to and from work everyday."

i don't. i use most of my gas for personal trips. i live close to my work. weeks where i don't go anywhere but work i barely put a dent in my gas tank.

2/23/2010 1:04:03 AM

Quote :

"Lots of private self employed private contractors operate out of home offices today."

With the smaller number of firms to watch, the IRS will get around to you in no time. They will want to get a list of the B2B customers you work with, records of your business activities etc. IF you can con them into believing you're using your house in a bono-fide business venture...congratulations you cheated the gov't.

The crappy system we suffer under now has many cheaters including the Treasury Secretary. You'll never eliminate all fraud, but with fewer firms to watch, it's going to be a lot harder to do.

2/23/2010 1:11:14 AM

how has the past 10 years changed a pet's outlook on an owner?

2/23/2010 1:32:02 AM

Quote :

"i don't."

Well sucks for you then.

Quote :

"With the smaller number of firms to watch, the IRS will get around to you in no time"

Funny that the front of the fairtax book is "NO IRS". But you have police the nearly countless transactions, not just businesses.

Quote :

"They will want to get a list of the B2B customers you work with"

That's fine, I have one that I sell to, and many I buy from.

Quote :

"IF you can con them into believing you're using your house in a bono-fide business venture...congratulations you cheated the gov't."

I am a business. You seem to think that labor sell is not a B2B transaction, it is. That makes me a business. You could make a consumption tax work, but you would have to tax B2B transactions as well. Many countries already have this, it's called a Value Added Tax.

2/23/2010 9:39:18 AM

Do we not tax B2B transactions now? We do.

Eliminating that, will lower cost of doing business in the US. Thus attracting jobs. However, when you buy something for your business that a consumer could buy, you would pay the sales tax. THat is my understanding how that works. End products.

So the paper for your printers, taxed. The gas for your car, taxed. The electricity, taxed. Etc. Buying a part needed to make your product...not taxed. Doctors visits, taxed.

2/23/2010 10:33:20 AM